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American Economic Association Superstar Cities Author(s): Joseph Gyourko, Christopher Mayer and Todd Sinai Source: American Economic Journal: Economic Policy , Vol. 5, No. 4 (November 2013), pp. 167-199 Published by: American Economic Association Stable URL: Accessed: 05-11-2016 00:42 UTC JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected] Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at American Economic Association is collaborating with JSTOR to digitize, preserve and extend access to American Economic Journal: Economic Policy This content downloaded from 137.99.231.25 on Sat, 05 Nov 2016 00:42:34 UTC All use subject to
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American Economic Journal: Economic Policy 2013, 5(4): 167-199 . 1257/pol.5.4. 167 Superstar Cities1 By Joseph Gyourko, Christopher Mayer, and Todd Sinai* We document large long-run differences in average house price appreciation across metropolitan areas over the past 50 years, and show they can be explained by an inelastic supply of land in some unique locations combined with an increasing number of high- income households nationally. The resulting high house prices and price-to-rent ratios in those "superstar" areas crowd out lower income households. The same forces generate a similar pattern among municipalities within a metropolitan area. These facts suggest that disparate local house price and income trends can be driven by aggregate demand, not just changes in local factors such as produc- tivity or amenities. ( JEL RI 1, R23, R31, R52) A dispersion striking feature across of US urban metropolitan housing markets areas and after towns World in War long-run II is the real considerable house price dispersion across US metropolitan areas and towns in long-run real house price appreciation rates. In Figure 1, which plots the kernel density of average annual real house price growth between 1950 and 2000 for 280 US metropolitan areas, average real house price appreciation ranged from about 0.2 percent to over 3.8 percent per year, with an especially thick right tail of growth rates above 2.6 percent.1 This dis- tribution is not an artifact of a few small areas that grew very rapidly. For example, Table 1, which reports the annualized house price growth rates for the top and bot- tom ten Metropolitan Statistical Areas (MSAs) with populations above 500,000 in 1950, shows that San Francisco enjoyed an average annualized real house price appreciation rate of more than 3.5 percent. By contrast, Buffalo realized barely 0.5 percent average annual real price growth.
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